A company manufactures a standard electrical component and operates 12months a year. The product has steady demand, and raw materials are ordered infixed batch quantities. All finished goods are shipped immediately afterproduction. The company wants to reduce its inventory-related costs by using theEconomic Order Quantity (EOQ) model.Raw materials are delivered 5 working days after placing an order. The companyoperates 24 working days per month.
Below is the relevant data:Table: Operational Data
(A)Use the EOQ formula to calculate the Economic Order Quantity.(Show the formula and all steps.)
(B)Based on the EOQ, calculate:
i) Number of orders placed per year
ii) Total ordering cost per year
(C)Find the following:
i) Average inventory level
ii) Total annual holding cost
(D)Calculate the Reorder Point (ROP) assuming uniform daily demand.
(E)Draw a flowchart with these steps in order:Place OrderSupplier DeliversStore Raw MaterialsProduce GoodsDispatch Finished GoodsUse standard flowchart shapes and arrows to show the flow.
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